It’s been four months since we wrote in this commentary that the market was undecided between whether recent market rallies were pointing towards an impending correction (a euphemistic term used to describe a sudden drop in prices), or the foundations for further expansion. The ongoing strong returns investors have enjoyed in the diversified funds could suggest that any nervousness at that time was unfounded, but it may be that the headline figure is a little misleading.

The New Zealand equity market has indeed continued to surge upwards, with a further 3.4% uplift in July taking the year to date return to well in excess of 20%, but given the weakening business and consumer confidence this probably tells us more about the ongoing demand (locally and offshore) for our higher dividend paying companies than a reassessment of the fundamental valuation of NZ businesses.

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